I am a CPA in Texas with an MBA from the University of Chicago. I have seen a lot and made many mistakes. Hopefully by now I will have learned something from them. Just as importantly, you may learn something from my mistakes. You can e-mail me by clicking on my "View my complete profile".

Tuesday, January 12, 2010

Plea Bargains, No Bargain

"A surprise twist in the criminal case against Broadcom Corp. co-founder Henry Samueli again raises questions about plea bargains, one of the most important and controversial aspects of the justice system. In a Santa Ana, Calif., court last week, federal Judge Cormac Carney dismissed the criminal complaint charging Mr. Samueli with lying to the [SEC] in its investigation of whether Broadcom misstated its earnings by improperly accounting for executive stock options. Judge Carney's dismissal came even though Mr. Samueli had stood before him in 2008 and pleaded guilty to that very crime. ... These defendants often end up choosing that route because they feel trapped in a corner, or fear getting stuck with a long prison sentence if they go to trial and lose. The evolution of the criminal-justice system in recent decades has put many defendants 'under all but impossible pressure to plead guilty, even if they're not,' said Yale law Prof. John Langbein, a critic of the plea-bargain system. 'The government put incredible pressure on' Mr. Samueli, [Gordon Greenberg, his attorney] said. The US attorney's office declined to comment. ... One reason for false pleas is that potential prison sentences, particularly on the federal level, have increased for many crimes. This has helped put more power into the hands of prosecutors, who decide what charges and how many counts to levy against a defendant. Generally, the more charges and counts, the more the potential prison time. If a defendant exercises his right to a trial, he or she faces all those counts. ... And plea bargains are an essential part of the system, accounting for some 95% of all federal convictions, according to recent statistics", John Emshwiller and Nathan Koppel at the WSJ, 19 December 2009, link: http://online.wsj.com/article/SB126118028408697753.html.

Lying to the SEC? Was any SEC employee charged with obstructing the operations of Congress, 18 USC 1505? The prosecutors control the charging system, which is what our federal system is 95% of the time. The AUSA says in effect, "I can charge you with 76 counts of X. For serving six years, I'll charge you with three counts of Y. Deal? If you decline I will make you pay $2 million in legal fees. Got it"? An AUSA faced with a billionaire has a problem. Joe Schmoe has little choice. Your typical AUSA could no more try a case than I can do neurosurgery. Being exposed to the California Central District US attorney's office, I conclude it's not the US worst. Only second worst. What's the real crime in going to trial? Making the AUSA work. Oh the sacrifices AUSAs make for you. Many times the defense lawyer pressures his client into a plea which suits both attorneys. Why? Suppose the defense lawyer is paid $250,000 to represent the defendant. Many times that's the fee, whether the case is tried or pled out. You figure out where the defense lawyer's economic interest is. Further, when the AUSA becomes a defense lawyer, he knows how his fees will be structured. Net result: both lawyers angle to avoid trial, whether the defendant is guilty or not. My suggestion: a revision of federal criminal procedure. Henceforth, any government witness or the AUSA can be questioned by the defendant with no right to object! if he chooses not to answer, fine. Let the jurors draw adverse inferences! Lawyers regulating the legal system doesn't work. Except for the lawyers.

Anonymous:If you are interested in this, I suggest you read some of Richard Posner's work, like "Overcoming Law", 1995. No one has written more about the intersection of Law and Economics. Among Posner's feats is: he is the most cited judge of all time.